India with a population of around 1.3 billion and 17% percent of the World population is a lucrative ground for companies around the world. Unlike China with the largest population in the world but with a closed market, India allows much more freedom to outside competitors.
But this also brings a lot of competition in the market. So how do you compete in such a huge market with so many competitors? Make great products? Do extreme amount of marketing? Or simply bribe the consumer! And that’s what Google is up to.
India is by itself a tough market to crack. It boasts a huge smart phone market and rapidly growing internet presence. This is mostly due to dirt cheap internet subscription prices thanks to Reliance Jio, the Indian telecom giant. Regardless, India is a very hard market to profit because Indians spend very less on online services as compared to the rest of the world.
This is due to the per capita income of India being very low. Quoting World bank “While India’s average annual per capita income was $1,410 in 2011 — placing it among the poorest of the world’s middle-income countries — it was just $436 in Uttar Pradesh (which has more people than Brazil) and only $294 in Bihar, one of India’s poorest states”. (source Wikipedia)
So app developers cannot hope to make much profit with direct sales. Rather here quantity matters, because a larger audience gives larger ad revenues as well as larger data to sell to advertisers. And Google sits on top of both the data and advertisement ecosystem.
Problem is a lot of apps that Google wants Indians to use, has already established players in the market. So when Google wanted to launch its payment platform in India, it did something ridiculous to get an edge over the homegrown PayTM app. It started literally bribing its customers.
Google launched a made for India payment app called Tez (now Google Pay). Unlike the western counterpart of the payment app, Google’s Tez leveraged on Unified Payments Interface (UPI), an instant real-time payment system developed by National Payments Corporation of India. The system allows instantaneous transaction from and to Bank accounts.
This opened gates to a new form of customer gain and retain methodology. For every transaction that a user does, they receive a scratch card with varying amount of money as a reward. This would then be deposited to the users bank account instantaneously.
Gone were the days when apps would give free or discounted trials for using their apps, or referral bonuses in terms of services that could be utilised later. Google could now literally bribe you with real money instead. The result has been phenomenal. Almost everyone I know has switched to Tez (now Google Pay) for quick transfer of money. Although the bonuses are drying up as the chances of cash rewards has gone down considerably (from hundred percent cash reward every transaction, to once in a dozen transaction at present).
The Indian version of Google pay has now over 50 million installs and is becoming a serious competitor to homegrown PayTM. But Google doesn’t stop at Google Pay with this cash for app scheme. It is extending this now to its other apps. It is leveraging Google Pay app to provide cash rewards for using other Google apps.
Google had used it for giving scratch cards on Google Pay for users using its Files app to transfer files. Users could get up to three scratch cards for sharing files with fellow users of Google’s Files app. These scratch cards would then reward the users on both sides with cash rewards up to rupees 50 (~0.7 dollars).
And now Google is using the same scheme for inviting people to Google’s voice and video calling platform, Google Duo. This time the users would be rewarded up to 1000 rupees (~14 dollars) for inviting and getting their friends to join. The joiner too would be given same reward in return.
This raises the question for the ethics behind such a scheme. For a company with deep pockets, this is a mere investment for building a future base for advertisement and data collection, which brings them money in the long run. But this is also cannibalising smaller players.
So far app users could only redeem facilities on the same platform, but Google paying real money might change the equation altogether. Users would obviously like rewards that can be used anywhere rather than on the platform that wants to retain them with rewards. And money is obviously the most versatile reward.
Smaller players with nothing to give directly cannot compete with such a scheme. Google is buying user base with raw money. It is counting on India to grow in the coming years. And as the per capita income of the population increases so would the spending on Google’s budding ecosystem.
On the opposite end of the spectrum, new players almost always require profits in a couple of years at the least. They cannot play the long game of acquiring user base with money now, only to be paid back maybe a decade later. And even if they want to play Google’s game, they don’t have a payment platform where they can provide monetary benefits.
So while what Google is doing is not unlawful, it is not exactly ethical. Google is buying its way to dominance without breaking any laws and in the process burying the competition without giving them a fair chance to compete.